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Trade talks between the US and various countries will be of interest, particularly with China and obviously for India. While India has a larger services exposure to US, it remains to be seen if India can benefit if global supply chains reduce their dependency on China.

Indian markets have rebounded quickly from Sep’24 lows and have remained resilient through geopolitical turmoil across the globe and in India itself. With the revival in markets, we have seen increased capital market activities – both primary and secondary.

We believe the fabric of the market rise is in favor of companies which have both a) High growth prospects and b) Which deploy capital judiciously to offer long-term value creation opportunities.

We expect this trend to claw back the relative underperformance seen in FY24. We remain constructive on Indian markets due to a confluence of factors such as i) Sustainably high GDP growth, ii) Rising per capita income, iii) Financialization and digitization and iv) Positive policy environment which could potentially lead to steady growth for India Inc.

June 2025

The Nifty gained 3.1% in June, marking the fourth-consecutive monthly rise. Mid-cap and small-cap indices up 4% and 6.7%, respectively, outperforming large-cap.

Almost all sectors ended in the green, except FMCG. Other sectors like IT, Healthcare, and Realty were up 4.7%, 3.9% and 3.8%, respectively. The market sentiment was boosted by the Reserve Bank of India's surprise 50 basis points rate cut; easing inflation; falling crude and the ceasefire between Iran and Israel.

The key developments of the month include:

* The US tariff hike on steel and aluminium imports, from 25% to 50%.

* The RBI’s 50 bps reduction in repo rate to 5.50% with a shift in stance to neutral, and reduction in Cash Reserve Ratio (CRR) by 100 bps to 3.0%, in four tranches of 25 bps each between September and November.

* The US Fed Federal Open Market committee (FOMC) kept the policy rate unchanged at 4.25-4.5%.

* The RBI relaxation of project finance norms, primarily through reduction in provisioning requirements for banks and NBFCs lending to infrastructure and Real Estate projects.

Foreign Portfolio Investors (FPIs) bought ~US$2 bn of Indian equities in the secondary market, whereas DIIs bought US$8.5 bn.

The World Bank cut its global growth forecast for 2025 by 40bp to 2.3%, saying that higher tariffs and heightened uncertainty posed a "significant headwind" for nearly all economies, with India’s FY26 forecast retained at 6.3%. On the economy front, May Consumer Price Index (CPI) inflation moderated to 2.8% from 3.2% in April while Wholesale Price Index (WPI) inflation for May came in at 0.4% YoY compared to 0.9% in April. On a YoY basis, food & beverage inflation fell to 1.5% (v/s 2.1% in Apr) while core CPI (ex-Food, Fuel, Energy, Gold) stayed at 3.5%.

May industrial production growth slowed to 1.2% vs 2.6% in the previous month. Growth was subdued due to sluggish growth in the Mining and Electricity sectors that contracted by -0.1% and -5.8% respectively. Manufacturing grew by 2.6% in May. GST collections for June 2025 stood at Rs 1.85 lakh crore (US$21.6bn), reflecting a 6.2% YoY growth. The country’s merchandise trade deficit narrowed to USD 21.9bn in May 2025, down from USD 26.4bn in April and USD 22.1bn in May 2024. Imports dipped by 1.7% to USD 60.6bn, likely led by softer energy prices, while exports contracted 2.2% to USD 38.7bn.

The Banking sector (non-food) credit growth stood at 9.6% as on 13 Jun’25 vs ~8.8% in May’25 (vs ~11% in FY25). On the liabilities front, deposit growth improved to ~10.4% as on 13 Jun’25 vs ~9.9% in May’25. Credit growth is expected to improve in FY26, led by Repo rate and the CRR rate cut by RBI, revival in corporate capex cycle as well as old risk weights being restored by RBI for Microfinance Institutions (MFI) and Non-Banking Finance Company (NBFC) segments.

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